Sunday, November 29, 2015
Climate Change Confusion
The climate change debate confuses me. President Obama, about to depart for Paris for international summit of climate change containment, says climate change is a worst threat to mankind than terrorism.
Yet the earth is only 0.9 degrees Fahrenheit than 35 years ago, and globally, as scientists keep confirming, there has been no statistical increase in frequency or intensity of storms, floods, droughts, or natural disaster deaths, although the frequency and intensity of news reports would have you believe otherwise.
There may be alternatives to fossil fuels but with fracking and other high tech advances, these fuels are available in greater abundance at lower costs than alternatives . Solar and wind supply only 1.5% of energy needs, and for political reasons, nuclear energy is retreating.
I hope the President will share with the 200 nations at the summit the U.S. stellar performance in reducing green house gases. Our CO2 emissions reached a 27 year low in April 2015, and have declined by 9% since 2005, thanks in no small part to our exploding production of natural gas, a low carbon emitter which, because of fracking, has increased by 237% since 2006.
Good luck in Paris, Mr. President, in convincing other nations, particularly China (coal consumption up 2.6%) and India (coal consumption us 5.0%). For the present, at least, there is no economic alternative to fossil fuels in developing nations, especially those without electricity . Cheap natural gas is a powerful economic solution to reducing coal as a source of energy for producing electricity.
Still I suppose it is better to suffer economically now than to suffer environmental damage later.
The New York Times has provided us with short answers to hard questions about climate change.
• How much is the planet heating up? 1,7 degrees Fahrenheit since 1880.
• How much trouble are we in? Big trouble in 25 to 30 years, and more trouble later unless we do something now.
• Is there anything I can do? Fly less, drive less, waste less.
• What’s the most optimistic scenario? The earth becomes less sensitive to greenhouse gases, plants and animals adapt, nations reduce emissions.
• What’s the worst case scenario? Collapse of food production, coastal flooding, and unpredictable monsoons.
• Will a high tech breakthrough help? Yes, but it will cost an arm, a leg, and more cash than most nations, including the U.S., are willing to spend.
• How much will seas rise? Best bet is one foot per decade.
• Are predictions reliable? Evidence from past indicates as amount of CO2 rises in atmosphere, the earth warms, ice melts, and seas rise.
• Why do people question climate change? Because evidence is sketchy, and because of conservative ideology, money interests in fossil fuels, and short term denial rather than long term trends.
• Is crazy weather tied to climate change? In some cases, maybe, such as heavy rainstorms, coastal flooding, and drought in California and elsewhere.
• Will anybody benefit from global warming? Yes, maybe some nations will frozen hinterlands.
• Is there reason for hope? Yes, but the hour is late, and other nations, led by U.S. must get their act together.
If President Obama persuades other nations to follow his lead in controlling fossil fuels emissions, climate change may be slower with less damage than predicted, but it will also be more costly, more economically painful.
1. Matt Ridley and Benny Peiser, “ Your Complete Guide to the Climate Debate,” WSJ, November 28-29, 2015.
2. Justin Gillis, “Short Answers to Hard Questions about Climate Change,” NYT, November 28, 2015.
Saturday, November 28, 2015
Pfizer and Tax Inversions
In a $160 billion deal, Pfizer has agreed to merge with Allergen, an Irish drug company in a tax inversion, defined as a transaction used by a company whereby it becomes a subsidiary of a new parent company in another country for the purpose of falling under more beneficial tax laws.
In the case of Pfizer, the new merger would reduce its tax burden from 25% to 17%-18%,
This is a good deal for Pfizer and its stakeholders. President Obama says the transaction is “unpatriotic” because it deprives the U.S. government of revenues and transfers job abroad.
The U.S. at 35%, has the highest corporate tax rate in the developed world. Ireland, at 12.5% has one of the lowest rates. For this and other reasons, more than 47 companies have moved their headquarters abroad in the last decade with more to come. Medtronic and Walgreens are considering a similar move.
Ireland, with its English-speaking populace, and its experience in serving as headquarters with other drug companies is a logical place to go. Pfizer makes 60% of its profits overseas, and Ireland is a good place to park those profits until the U.S. lowers its corporate tax to Pfizer can compete with other global companies with foreign headquarters such as GlaxoSmithKlne, AstroZeneca, and Novartis.
Pfizer, to please its stakeholders, does not want to be double-taxed by the host country and the U.S., so it parks $74 billion abroad.
So why doesn’t the Obama administration lower its corporate tax to bring workers and cash back home? I suspect the reason is mainly ideological. The administration is no friend of corporate America. Nor is his possible successor. Hillary Clinton, who hopes to succeed Obama, says, “ We cannot delay in cracking down on inversions that erode our tax base.”
But does a high corporate tax rate erode the U.S. tax base? Experience indicates lowering tax rates, particularly capital gains, always increases government revenues. Lowering corporate rates would likely have the same effect.
Arthur Laffer, of Laffer Curve fame, has shown that when taxes reach a certain level, federal tax revenues fall. Pfizer’s move to merge indicates that a 35% corporate income tax has reached that level.
Pfizer CEO, Ian Read, has been travelling to Washington for two years, trying to convince Obama, his acolytes, and Congress and everybody who would listen that the corporate income tax rates was too high. Read claims because of U.S, tax code, Pfizer can invest only 65 cents on the dollar of overseas profits.
Lower the corporate tax to be competitive with Pfizer’s drug rivals, or Pfizer will move to Ireland to merge with Allergen and to become the world’s largest drug company with revenues of $322 billion. Corporate America’s first obligation is to satisfy its stakeholders by promoting growth and profits, not to enrich the U.S. treasury or its overreaching bureaucracy.
The obvious solutions to preventing further tax inversions are to reduce the corporate tax, to simplify the tax code, and to stop punishing companies for investing in the U.S.
ObamaCare: Not an All-or-Nothing Proposition
Thou has seen nothing yet.
Six years in, it is clear ObamaCare is not an all-or-nothing proposition.
As is, the health law is not accepted by the majority of Americans , Republicans, or Independents, or even Democrats. But they do not totally reject it either.
Certain aspects of the health law will remain - no exclusion by health plans for those with re-existing disease, coverage of young adults under their parents plans, coverage and subsidies for low-income Americans.
Other aspects of the health law are likely to go away or to be severely modified – individual, employer, and religious mandates, the raft of regulations that hamper small businesses and dampen innovative and entrepreneurship, and the compulsory use of electronic health records by physicians or Big Data as the final solution to almost everything, , to name a precious (and expensive) few.
Total repeal or total acceptance is not in the political cards.
Why the mixed picture? Well, in its present form, the Patient Protection and Affordable Care Act is neither protective nor affordable for many in the middle class.
Both political parties have dug in their heels and are unlikely to budge unless the American electorate says otherwise.
The sweeping GOP midterm victories in 2012 and 2014 assure this gridlock, as do two liberal rulings in the Supreme Court declaring the law as constitutional.
The health law has had its failures as outlined in a Human Events article in 2011 (“Too Ten Failures of ObamaCare after One Year.” The article listed these “failures”.
1. Explodes federal deficit
2. Kills jobs
3. Lose your doctor and health plan
4. State budget deficits to grow
5. Higher premiums
6. Crushes business
7. Fewer Americans to have access to care
8. Senior citizens to lose healthcare coverage
9. Overburdens small business
11. Tax hikes
Some of these things have come to pass, but not all and not all to the extent forecast.
The unemployment rate is 5.0%; 17.6 million uninsured are now covered thanks to the health exchanges and Medicaid expansion; overall government health care spending has ebbed; medical bankruptcies are fewer, and the government has initiated changes that it says promise to increase quality and integration, and save money, given time and good intentions.
Government oversight and failures have become more evident, and corrective market and political forces have kicked in.
I am optimistic, while the health reform law may not be all-or-nothing, something useful will turn up. Something is better than all or nothing.
Friday, November 27, 2015
Obama’s Passive Aggressiveness
I don’t care what color it is, as long as it’s black or white.
It’s black Friday, and I have a few black thoughts on my mind.
President Obama sees things in black or white terms. It’s his way or the highway. He's right and you’re wrong. If his policies fail, it’s your fault, not his. If you don’t see things his way, you’re the enemy.
In some circles, this attitude is known as passive-aggressive behavior , defined as the indirect expression of hostility, such as procrastination, stubbornness, sullen or deliberate and repeated failure to accomplish tasks for which you are responsible.
Obama repeatedly blames Republicans for his failures in domestic and foreign policy. His number one enemy is the GOP, not ISIS. He stubbornly refuses to call ISIS Muslim terrorists or extremists.
Obama procrastinated for seven years before making a negative and unpopular political decision on the Keystone XL pipeline.
He stubbornly refuses to talk to or compromise with the loyal opposition, who like him, have the best interests of the nation in mind, about such key issues as modifying ObamaCare’s dysfunctional mandates; or listening to his military advisors, who he continuously overrules; or to critics who tell him that the practical health of the economy on the middle class is more important than the distant threat of climate change on the planet; or to a bipartisan majority who think a pause in admitting refugees to the United States is an important measure in protecting us against imported terrorism.
Instead, the President is obsessed with raising minorities to a majority status, with achieving equal outcomes for all in spite of differences in skill and accomplishments, with punishing the successful with higher taxes and more regulations; with peace, concessions and appeasements to one’s foreign adversaries at any price, with avoidance of war and withdrawal from foreign affairs no matter what the consequences, with blaming and apologizing for the world’s past and present problems on American capitalism and European colonialism . For President Obama, these are black and white issues, with no shades of gray, no room for neutral points of view.
Mr. President. You’re responsible for America’s economic growth and for our success in foreign affairs. You’re our leader. We don’t expect perfection, and we expect debate and dialogue. Please don’t white wash your failures on the backs of your domestic enemies. We want you to succeed.
Thursday, November 26, 2015
Thanksgiving Is Brown
Thanksgiving is Brown
What other color could it be.
Christmas is Green.
New Year’s Day is White.
Easter is Yellow.
President’s Day is Purple.
Labor Day is Gray.
Independence Day, Veteran’s Day, Patriot's Day, and Memorial Day are Red, White, and Blue.
Columbus Day is Ocean Blue.
Martin Luther King Day is Black and Blue.
Valentine’s Day is Purple and Red.
Halloween is Orange.
That leaves Brown for Thanksgiving, an autumn Brown, a fallen leaf Brown, a dying grass Brown, a burnt squash Brown, a stuffing Brown, a left-overs Brown, a roasted and toasted Brown, a pumpkin Brown, a chestnut Brown, a coffee Brown, a chocolate Brown, a Brandy Brown, shades of Brown with a yellowish or reddish hue, and above all, a turkey Brown.
Wednesday, November 25, 2015
Four Health Law Questions with Applied Math Answers
Mathematics may be defined as the subject in which we never know what we are talking about, nor whether what we are saying is true.
Bertrand Russell (1872-1970), Recent Work on the Principles of Mathematics
I read today what an advocate of the Health Law and what an opponent had to say about the effect of the law (Affordable Care Act’s Next Phase: Leslie Dach Says It Has to be about Quality, not Quantity”; “Sen. John Thune Says Republican Alternatives Do A Better Job by Relying on Market Forces, “ WSJ, November 24), and I decided to apply a little math. After all, as a sage said, “In God we trust, all others use Data.”
Leslie Dach, a senior counselor for HHS observes that since the Law went into effect, 17.6 million more people now have coverage, a 45% drop in the uninsured rate.
Yes, says Senator Thune, that’s true but the cost has been $1.3 trillion, and 35 million are still uninsured, and, according to the Congressional Business Office, there will still be 27 million uninsured by 2015.
The first question. Has the cost of covering 17.6 million over the last 5 years been worth it? If you divide $1.3 trillion by 17.6 million, that amounts to $73,864 for each newly insured person.
The second question. Is this $73,864 worth the massive disruption it has created for the middle class, tax payers, patients, physicians, and hospitals. If one assumes America has a population of 320 million. $1.3 trillion divided by 320 million comes to $4062.40 per person. Whatever happened to that original ObamaCare promise that the health law would reduce premiums for a family by $2500? Instead the opposite has occurred, with premiums up $4865 for the typical family.
The third question. Has the spike in costs translated into increased quality and satisfaction ? The American people as a whole apparently think not since the average of national polls indicate 43.4% approve of the law while 50.0% oppose it.
The fourth question. Here we leave solid mathematical ground, does centralized national government or decentralized market forces do a better job at reforming health care? The question is moot since only the first has been tried.
Leslie Dach claims government is better because it incentivizes to pay for “quality not quantity” by doing away with fee-for-service medicine and by incentivizing care to be “integrated and organized.”
Senator Thune insists markets will do better through interstate competition, reduced regulations, doing away with mandates, grouping small businesses into high risk pools, expanding health savings accounts, having states regulate Medicaid according to the particular needs of each individual state.
Who knows the answers? The ultimate jury, the American people, are still out, at least until 2016 and undoubtedly thereafter. Until then, as the Mock Turtle in Alice in Wonderland, remarked, there will be “Reeling” and “Writhing” in the different branches of mathematics – Ambition, Distraction, Uglification, and Derision.” In the modern era of digitization, another branch, Big Datafication, may hold the answer.